Tag: credit score

Crazy Credit Score Penalty: Amounts Owed

~ Carolyn Warren ~ 4 Comments

We all need to understand the Amounts Owed section on credit scoring, because it makes up a crazy 30% of the credit score!

The points you get under Amounts Owed is almost as much as all your positive credit history and all of your derogatory

See if you can get this credit scenario right:

Three people have identical good credit reports except for each one having one negative item. Which person will have their Amounts Owed (30% of the scoring model) docked the most?

1) Ms. Blue has a $500 Nordstrom card that went unpaid, became a charge-off, and is still has a balance of $500 on a $500 limit.

2) Ms. Green has an unpaid tax lien of $860.

3) Ms. Purple has an unpaid utility bill of $1,000.

Whose credit score got hit the hardest under the Amounts Owed section?

Take your best guess and then let me know by leaving a Comment if you got the answer right.

If you said Ms. Purple because her utility bill has the most money owed, you are wrong.

If you said Ms. Green because a tax lien is serious stuff, you are also wrong.

Ms. Blue is really feeling blue right now, because even though she owes less than her two friends, her credit score got hit the hardest for the $500 maxed out Nordstrom card. How can that be?

The Amounts Owed section applies only to revolving credit. Revolving credit does not have a fixed number of payments, and every time you make a payment, the credit is automatically renewed. Neither a tax lien nor a utility bill are revolving credit. Therefore, the amount you owe on those bills does not affect the super-important Amounts Owed section of your credit score.

When you know how the scoring system works, you are in control of your own credit score. To learn more about credit scoring, pick up a copy of Build and Protect Your Credit Like the Pros here.

Is Your Credit Score Above Average?

~ Carolyn Warren ~ 6 Comments

The average credit score is 703.*

In the mortgage home buying world, 703 is meh. It’s good enough to get a conventional loan (which is better than FHA), but a 703 score does not qualify for the best and lowest 30-year fixed rate.

For the best interest rate, you need a score of 740+. Some lenders will reward you with an even better rate if your score is in a 780 tier or 800 tier. Those are the lenders that cater to the creme de la creme borrowers.

In 2013, the average credit score was 691. Scores have been trending upward since then.

The graphic at top right shows the average score by age group.

The state with the highest average credit score is Minnesota at 733.

The state with the lowest average credit score is Louisiana at 677.

Some people have taken the steering wheel and boosted their scores by 50, 80, and even 100+ points. I’ve seen a score increase by 58 points in two weeks when the person paid down two high balance credit cards.

There are several ways to increase your score, and it all starts with paying every bill on time–every time.

The fastest way to increase your score is to lower your balance-to-limit ratio.

One way to hurt your score without knowing it is to open a new revolving credit card when you’ve already got two good cards open.

Another way to get blindsided is by not monitoring your automatic payments. I saw a person’s score knock him down by 50 points, because he didn’t know his student loan had been sold and his bank didn’t send the auto-payment to the new creditor. When he called to get it straightened out, the representative told him not to worry, they weren’t reporting him as late. But that turned out to be a lie. His credit report showed a brand new late payment, which cost him thousands of dollars in interest payments.

Having a high credit score also affects your auto insurance premium. Many drivers have no idea they are being charged more on their auto insurance because their credit scores are not top tier.

We are now in 2020. This is the time to take control of your credit. Grab a quick, easy read here so that you are smart about credit. Being smart about credit is being smart about money.

I don’t know anyone who has money to waste, do you? Make 2020 your year for excellence!

*(2019 second quarter, FICO8 Scoring Model) Experian Source here

 

 

New Year’s Resolution: Build Better Credit

~ Carolyn Warren ~ 1 Comment

Is 2020 going to be your year for better credit? Will you buy a home in 2020?

If so, here is a list to get you started in the right direction.

BETTER CREDIT IN 2020

  1. I will pay all bills on the same day they come in.
  2. I will set auto-pay dates for earlier than the last date (when errors can cause an unfair late payment).
  3.  I will keep all credit card balances below 50% of the limit at all times.
  4.  I will buy only what I can afford to pay in full when the bill comes. (No more carrying balances and wasting precious money on interest.)
  5. I will not engage in so-called “retail therapy” or shopping out of emotion, which is an unhealthy financial habit.
  6. I will not take a loan with a finance company.
  7. I will not do any type of business with a “payday” type of loan.
  8. I will have credit in my own name and remove myself from piggyback credit on parents or strangers.
  9. I will remove myself from co-signed loans. I will not co-sign for anyone, ever, for any reason.
  10. I will take joy in nature, friendships, family, and God rather than in material possessions that I cannot truly afford.

Have a happy and blessed New Decade!

 

How bad is it to have a credit card you don’t use?

~ Carolyn Warren ~ Leave a comment

Thank you, HGTV Magazine for publishing my credit tip in your October issue.

In case you can’t read the image from the magazine page, here is what it says:

How bad is it to have a credit card you don’t use?

“It could actually work in your favor. Credit bureaus calculate credit scores in part by comparing the total balance across a person’s credit cards with total available credit. So if you have two active cards with low balances and a dormant one with zero balance, that makes you look good because the ratio of total balance to total credit limit is lower than if you had only two active cards, says Carolyn Warren, author of Repair Your Credit Like the Pros. Just know that issuers can cancel inactive cards without warning. “When a card gets closed, your credit score might take a hit since your available credit will go down,” Warren says. That may be an issue if you plan to apply for a mortgage. If so, pull out the unused card on occasion for, say, birthday dinners, and pay it off on time. But if there’s an annual fee that’s higher than the cash back or travel rewards you’re recouping and a credit dip isn’t an issue, close the card — one less fraud risk.”

 

 

Don’t Close Your Credit Cards (Here’s Why)

~ Carolyn Warren ~ Leave a comment

Warning! Closing credit cards you don’t use could lower your credit score.

Do You Have Unused Cards Like Jesse? Learn From His Mistake

How many credit cards do you own? Jesse had six credit cards: Alaska Air Visa, MasterCard, Sears, Home Depot, Paypal, and Target.

He read that only three credit accounts are needed to qualify for the best conventional loan. He also read that three credit cards are optimal for achieving a high credit score. So he took a look inside his wallet to see which cards he could get rid of without missing anything.

He quickly identified Sears, Home Depot, and Target as unnecessary. He almost always used his Visa for everything anyway, because he liked racking up the points for free flights.

So, he called customer service at the three store cards and instructed them to close the cards “at consumer’s request.”

Consequently, his credit score dropped by 15 points. Jesse was stunned and dismayed!

What happened?

Length of Credit History Accounts for 15% of Your Score

Jesse’s Sears and Target cards were five years old. His Home Depot card was four-and-a-half years old.

His Visa and Paypal cards were both less than two years old.

By closing out three long-standing cards, Jesse had lost points for longevity.

What Should You Do With Old Credit Cards You “Never” Use?

If you have a major credit card with a bank or credit union, you should use that for a small random purchase (grocery item, gasoline) once every quarter to keep it active and prevent the bank or credit union for shutting it down.

On the other hand, individual store cards remain open indefinitely (most of the time). Even if you don’t shop at Sears for three years, Sears keeps your credit line open in hopes that you might stop in and shop a sale.

There is no harm to your score in keeping old, unused cards open.

If you don’t want to handle the cards, cut them up, shred them, or burn them; but whatever you do, don’t call and instruct the creditor to shut them down! Keep those “long history” cards working for your credit score.

For more vital information about building A+ credit in the shortest amount of time, see here.

Thank you for reading this post. My aim is to help good folks achieve A credit and gain respect in the community.

 

Need a New Car? How Much Will Having a Low Credit Score Cost You?

~ Carolyn Warren ~ 2 Comments

Having a low credit score hurts your bank account in more ways than you might have known.

National Credit Care did a study and discovered that people with low credit scores paid on average $200 more per month for auto financing than those with top tier credit.

Let’s look at how much more your car costs based on the financing terms:

$200 per month x 60 months = $12,000 more for the car

$200 per month x 36 months = $7,200 more for the car

How does that make you feel to pay $12,000 more than the last customer, all because of that three-digit score called FICO score or credit score?

What could you do with that extra $7,000 to $12,000 if you weren’t shelling it out in interest to the wealthy finance company?

But that’s not all!

On top of paying more in financing, you also pay a higher insurance premium for having a low score — even if you have a perfect driving record.

That’s right! Insurance companies also check credit scores as part of their determination on how much to charge you for insurance.

And don’t get me started on credit card interest rates…! I’ll save that for another article.

Take control of your credit! Review and repair. Even if you can’t fix everything, you can raise your score and keep more of your hard-earned money in your own pocket.

I don’t know about you, but I can think of a lot things to do with $7,200 to $12,000! Grab yourself a copy of Repair Your Credit Like the Pros here and get started today.

Available in paperback and on Kindle here.

If you know someone who is thinking of buying an automobile, please pass on this information to them, because no one needs to throw away good money on higher interest rates.

Thank you!

New Credit Score Model is Being Tested: Will Your Banking Affect Your Credit Score?

~ Carolyn Warren ~ Leave a comment

Right now, your banking habits — how often you deposit money, your account balance, overdrafts — do not affect your credit score. In fact, the three big credit bureaus can’t see and don’t know about such things.

But all that might change this summer.

Experian is working with a data company called Finicity to test a new credit scoring system they call Ultra Credit Scores. If they like the results, then they may roll it out nationally as early as this summer.

How Ultra Credit Score Works

If you give Experian permission, it will access your bank account to collect additional data for credit scoring purposes. What they want to see is no overdrafts, at least $400 as an account balance average for three months, and consistent deposits going into your account.

For example, if your employer automatically deposits your check every two weeks, that’s good. On the other hand, if you deposit your own checks and do so sporadically because you keep cash out for spending and don’t always get to the bank right away, then that is deemed as inconsistent and won’t gain you points.

If you have a nice savings account, that is good. If you have an occasional overdraft, that will hurt your score.

This is all new. Right now, the credit bureaus do not have access to your bank records.

Invasive or a Good Idea?

The idea behind Ultra Credit Scores (so they say) is that it will help young people starting out who don’t have much credit established to gain a good score. But hold on!

If you turned 18 yesterday, you can build a top tier score simply by following best practices without letting the credit bureaus spy on your personal banking habits. The same principle applies to older adults who have thin credit. Start today and build a good credit profile for yourself. It’s not hard!

I suppose if you have thin (not much) credit and you’re in a super hurry to buy a house right now, then the Ultra Credit Score system could help you. Frankly, I think there are a whole lot of Americans who prefer to keep their privacy and will deem it invasive.

Don’t Worry: They Can’t Spy If You Don’t Give Them Permission

Experian cannot access your banking information if you don’t give them permission, so don’t freak out: you are still in control.

Also, Experian is the only one of the three credit bureaus who is testing Ultra Credit Scores. If it ends up bringing them more revenue, then Equifax and TransUnion might follow suit; at this point, we don’t know.

Do You Want to Ensure Yourself of Having Top Tier Credit?

All the information that the professionals know about getting that 740 to 800 credit score is revealed in Build and Protect Your Credit Like the Pros. You can take a look here.

With a top tier score, you will save money on insurance premiums, interest rates, and favorably impress employers. $8.99 ($5.99 Kindle) is a tiny amount to spend to save hundreds and even thousands of dollars.

Thank you for reading my post. I hope you will share it on social media so others can learn about the new credit scoring system.

Three Big Credit Bureaus Grilled By Congress For 6 Hours

~ Carolyn Warren ~ 2 Comments

This week the big three reporting agencies TransUnion, Equifax and

Mark Begor/Equifax, James M Peck/TransUnion, Craig Boundy/Experian

Experian spent six hours giving testimony to Congress. They were asked questions regarding every aspect of their companies ranging from dispute resolution practices, cyber-security and the fact they have no other competition in their space.

With Maxine Waters, a long time consumer advocate at the helm of the financial services committee, you can bet the farm that this is not going to be a comfortable year for the bureaus.

Waters has already introduced a bill that would require yet another overhaul of the credit reporting system as well as amendments to the Fair Credit Reporting Act. Subscribe for updated information as it becomes available.

Many thanks to Chad Kusner, Credit Repair Resources LLC, for this information. CCCR offers a credit report analysis and consultation service for people who need credit advice without a full credit repair. More info here.

Build and Protect Your Credit Like the Pros guides you to achieving A+ credit in the shortest time possible.

Having a top tier credit score saves you money on insurance premiums, interest rates, and gains you respect in the community.

“Must have” for every American. Available on Amazon here.

Experian Wants to Spy into Your Bank Account

~ Carolyn Warren ~ 8 Comments

Experian has announced that it wants access to view people’s bank accounts. It wants to see who you’re making debit deposits to, who you’re paying, and when. It wants to look at items that do not report to the credit bureaus.

For instance, Experian wants to look at your cell phone payment, your utility bill, your Xfinity bill, and possibly your rent payment.

They’re calling this new program “Experian Boost.”

Their excuse for gaining this extra access into your personal life is that they claim it will improve credit scores for people who have thin credit, meaning not much credit.

But here’s the problem…

The Experian Boost program uses the FICO Score 8 model, which mortgage lenders consider outdated and don’t even use anymore. Mortgage companies are using FICO10. So this spy action won’t help you qualify to buy a home.

The good news…

is that you must give Experian permission in order for them to access your bank accounts. No permission from you = no spying by Experian.

This new “pioneer program” (as Experian likes to brag) is scheduled to come out in 2019.